Netflix Executives Agree: Streaming Is 'Rerun TV'

Netflix adopted a surprisingly humble tone in its letter to shareholders Monday, positioning itself as a friend to cable and satellite companies, even as the company's subscriber base continued to increase.

This site may earn affiliate commissions from the links on this page. Terms of use.

Netflix adopted a surprisingly humble tone in its letter to shareholders Monday, positioning itself as a friend to cable and satellite companies, even as the company's subscriber base continued to increase.

Netflix reported its highest profits in nine quarters - $60 million, representing 88 percent year-on-year growth - on revenue of $719 million, 46 percent higher than the first quarter of 2010. The company added 3.30 million U.S. subscribers, a 94 percent increase, for a total of 22.80 million subscribers. Overall, Netflix has 23.6 million subscribers.

"This growth underscores the value of our increased spending on an ever-broader selection of TV shows and movies, our constantly improving personalization technology, and the Netflix brand," Reed Hastings, the Netflix chief executive, and David Wells, the company's chief financial officer, said in the letter to shareholders.

At the same time, Netflix positioned itself as a friend to what it referred to as Multichannel Video Programming Distributors, or MVPDs. Fears of "cord cutting," or consumers ditching their cable and satellite subscriptions for a combination of free TV and Internet subscription services, didn't happen, Netflix said.

In fact, not only did cord cutting slow, it became cord mending with total U.S. MVPD households growing in the latest estimates.

"Simply put, the data shows that Netflix is a supplemental channel to MVPD. While Netflix is likely to show huge growth again this year, we think MVPD cord cutting will be minimal to non-existent. We hear some stories from customers who have Netflix and no MVPD service, but these are generally people who rely on free broadcast TV (which is now in HD) and supplement with Netflix, rather than switching from MVPD to online."

"Rerun TV"

Even more surprisingly, Netflix agreed with the characterization of Comcast chief executive Brain Roberts, who dubbed the Netflix Watch Instant streaming service essentially "reruns TV". "What used to be called 'reruns' on television is now called Netflix," Roberts said in February.

A quarter ago, Netflix used a watered-down version of the same argument, noting that Starz had seen a boost in subscribers after Netflix started showing older seasons of "Spartacus," a blood-and-breasts gladiator series.

On Monday, Netflix positioned itself as a partner to those MVPDs, rather than a competitor. "Recently, the CEO of an MVPD characterized Netflix as 'rerun TV'. While we don't plan to use that line
in our next marketing campaign, he is fundamentally correct," Netflix said.

"Our focus for TV shows is on prior season TV and completeness of series, because this class of content enables us to license content broadly and provide consumers a differentiated experience. Also, when we offer prior seasons of 'Glee' or 'Mad Men', we think we grow the audience for current season on MVPD. We hope over time that HBO and
Showtime will let us prove this proposition for them. We think more and more evidence that prior season on Netflix helps current season on MVPD will become apparent from our deals with Disney, Viacom, CBS, NBCU and others."

Netflix executives also acknowledged that they're considering "enforcing" a limit on streams, possibly charging for the privilege. Subscribers to the Netflix basic streaming plan are theoretically limited to streaming one video stream at a time, although the limit isn't stringently enforced.

"This is a gradual evolution," Hastings said, in response to emailed questions from shareholders and analysts. "It's not going to be an immediate 90- or 180-day thing for Netflix. And I think pricing is certainly part of that evolution, changes to the interface is part of that evolution, changes to how we -- if and when we enforce concurrent stream limit per device or by account. So there's a lot of things for us to figure out and tease out. We wouldn't want to alienate the subscriber or the consumer as we go through those. And I think that we'll evolve to those over the next couple of years."

And while Netflix currently streams movies to the iPhone, it doesn't yet support the Android platform. "We're working hard on Android," Hastings said. "Don't have any news at this call. It's a big priority for us, and stay tuned."

Mark Hachman Mark joined ExtremeTech in 2001 as the news editor, after rival CMP/United Media decided at the time that online news did not make sense in the new millennium.
Mark stumbled into his career after discovering that writing the great American novel did not pay a monthly salary, and that his other possible career choice, physics, required a degree of mathematical prowess that he sorely lacked.
Mark talked his way into a freelance assignment at CMP’s Electronic Buyers’ News, in 1995, where he wrote the...
More »